The housing recovery is still very much in its middle stages, as home values in half of the nation's 100 largest metro areas will not reach their pre-recession peak levels again for another three-plus years, according to Zillow's Real Estate Market Report for the second quarter.
Nationally, home values remain 11.3% below their 2007 peak. Looking ahead, U.S. home values are expected to rise another 4.2% through the second quarter of 2015, according to the Zillow Home Value Forecast.
It will take 2.7 years for national home values to re-achieve their pre-recession levels, assuming a steady rate of appreciation at the forecasted level, the company says.
Locally, in 50 of the nation's 100 largest metro markets, it will take three years or more for home values to reach prior peaks. Notable large metros where full recovery in home values will take longer than a decade include Minneapolis (14.5 years); Kansas City, Mo. (12.5 years); and Chicago (11.7 years).
‘In dozens of markets, homeowners that bought at the peak of the market in 2006 or 2007 will have to wait until 2017 or later to get back to the break-even point on their home – a lost decade in which they will have built up no home equity," says Stan Humphries, chief economist.
"This is reflected in stubbornly high negative equity and effective negative equity rates, with more than a third of Americans with a mortgage lacking enough equity to realistically list their home for sale and buy another,’ he adds.
‘But there is a silver lining as we navigate these tricky middle innings of the recovery. Because home values remain so far below their peak levels in so many areas, it is still possible for buyers to find bargains. This will be critical to maintaining home affordability over the coming years, especially as mortgage interest rates rise.’
U.S. home values climbed 6.3% year over year in the second quarter to a Zillow Home Value Index of $174,200: the slowest annual pace of appreciation recorded so far this year and a sign that the market is returning to more normal levels, according to the company.
In a more normal market, home values appreciate at roughly 3% per year. Home values nationwide were up 1% compared to the first quarter and 0.5% from May.
Nationally, rents rose 2.5% year over year in the second quarter, to a Zillow Rent Index of $1,310 but fell 0.3% compared to the first quarter. The quarterly decline was the largest recorded since Zillow first began publishing the Zillow Rent Index in late 2010.